PHILADELPHIA — Governors of 11 states have hardened an ultimatum to Eastern power grid operator PJM Interconnection to do more to hold down electricity costs for millions of people or face actions that could include some states leaving the regional market.
“We need states to have more of a say in how PJM operates,” said Pennsylvania Gov. Josh Shapiro. “We need to move more quickly on energy-producing projects, and we’ve got to hold down cost. If PJM cannot do that, then Pennsylvania will look to go it alone.”
Led by Shapiro, a Democrat, and Virginia Gov. Glenn Youngkin, a Republican, the governors convened a daylong meeting here Monday that produced a recital of their frustrations with PJM’s management and a pointed warning that their patience was running out. Two of the 13 states PJM serves — Kentucky and West Virginia — did not join the others in a continuing campaign for PJM policy changes.
Formed 98 years ago, PJM is both the oldest and largest regional electric grid, coordinating a wholesale power market for 67 million people from Chicago to the Atlantic coast. PJM is under increased scrutiny as governors struggle to address rising electricity prices hitting their states. Costs showing up on utility bills stem from wholesale market rules and dynamics and the extraordinary demand growth from big tech companies.
“Our families are being crushed,” said Democratic Gov. Wes Moore of Maryland.
PJM’s deeply complex market rules and an unwieldy governance structure dominated by industry interests are sources of frustration to critics. But the speed of the digital economy and a broader affordability crisis are spurring top state officials to get directly involved in how PJM operates. The goal is to shield consumers from costs tied to expectations of unprecedented electricity demand growth resulting from the build-out of artificial intelligence hubs.
In northern Virginia, PJM hosts the nation’s largest cluster of data centers for cloud computing and AI models. Last month, Google pledged to spend another $9 billion in Virginia. In June, Shapiro announced that Amazon plans to spend $20 billion on new data centers in Pennsylvania. Ohio and Indiana, both inside PJM, are also growing data center hubs.
Some electricity costs are tied to PJM “capacity payments” to electricity companies that guarantee future supply. Average wholesale power prices across PJM increased 41 percent in the first six months of this year compared to a year ago, according to the PJM independent market monitor, Joseph Bowring.
“The current conditions are not the result of organic load growth,” Bowring wrote. “The current conditions in the capacity market are almost entirely the result of load additions from data centers, both actual historical and forecast.”
How the governors ultimately respond is unclear. In addition to Shapiro, Youngkin and Moore, the conference heard from Democratic Gov. Phil Murphy of New Jersey. Murphy noted “billions of ratepayer dollars and the stability of our grid at stake.”
Aides to several governors said states would act individually on PJM issues — for now. But they said governors are discussing unified action to press PJM to fundamentally change the way it does business.
Pennsylvania’s Shapiro said it was important to “give PJM the opportunity to enact real reform.” Shapiro said PJM has “months, not years” to meet his timetable.
Youngkin noted he has been working on legislation to allow Virginia to reassess whether the state should remain a part of PJM. “Virginia will need to decide what’s best for Virginia,” Youngkin said. “This doesn’t mean that we are walking away.”
Youngkin renewed a previous demand from governors that the states get two seats on PJM’s nine-member board of managers. The PJM board had earlier rejected the governors’ proposal that two seats be filled by Mark Christie, former chair of the Federal Energy Regulatory Commission, and Allison Clements, a former FERC commissioner.
Christie is a Republican. Clements is a Democrat.
PJM had rejected the request, pointing to its detailed rules for filling board vacancies.
Christie, who spoke to the Philadelphia meeting, told POLITICO’s E&E News, “Utilities are regulated by their states. If their states tell them to leave PJM. then they’ll leave.”
PJM Chief Executive Manu Asthana got his turn to respond to the governors.
Asthana pledged PJM is and will continue to be open to ideas and eager to collaborate. But in defense of the organization he will leave at the end of this year, he did not accept the critiques or express the same level of urgency the governors had stressed.
Clements asked Asthana, “The fact is that there’s a lot of interaction with the states. … It’s a question of formal rights relative to decisions that get made in the process. Is there a way to get to yes on new opportunities?”
Asthana, praising the states’ involvement, replied, “We are by no means here to say, ‘We [are] absolutely perfect.’ … There’s opportunities to talk about improvements.”
But, he added, changes in governance are not easily made. “Our members are open to that conversation,” he concluded.
